State Bar of Wisconsin

Vol. 72, No. 2, February 1999

At Issue

Electronic Proxy Voting in Wisconsin Would Benefit Corporations, Shareholders

Wisconsin would be well served by amending its proxy appointment statute to specifically authorize electronic proxy voting.

By Catherine S. Powell

Like other states whose corporate law is based upon the Revised Model Business Corporation Act, Wisconsin's Business Corporation Law requires a proxy appointment form to be signed by the shareholder of record.¹ The term "signed"² currently does not clearly permit Wisconsin shareholders of record to send an email to a proxy solicitation firm or use a personal identification number to transmit a proxy appointment by touch-tone telephone. Thus, the validity of electronically transmitted proxy appointments is uncertain because such electronic identification, or even an electronic signature, may not meet the requirement for a signed proxy appointment.³

Wisconsin should amend its proxy appointment statute, as Delaware, New York, and at least 22 other states have done, to specifically authorize electronic proxy voting. Currently, electronic proxy voting is not feasible if the validity of the electronic proxy appointment is subject to question. Electronic means are already used by ADP Investor Communications Services, a proxy solicitation firm, for the transmission of voting instructions by the beneficial owner of shares held in street name to the nominee that serves as the record owner and is actually entitled to vote the shares. State law concerns about electronic proxy cards and voting are limited to shareholders of record and do not affect ADP's street name program.

In the April 1998 Wisconsin Lawyer, Speaker of the Assembly Scott Jensen (R - Waukesha) wrote about legislation to allow the use of digital signatures in Wisconsin.⁴ Near the end of the 1997 legislative session, the Senate passed AB 811 (1997 Wis. Act 306), with certain modifications from the Assembly version, authorizing the use of electronic signatures for documents submitted to a "governmental unit."⁵ The electronic signature law does not address electronic proxy voting and was not enacted with the intent of authorizing electronic proxy voting.

1. Wisconsin would be well served by a proxy appointment statute that recognizes the use of technology:
2. Shareholders could use the Internet or a touch-tone telephone to appoint a proxy - technology that is used by shareholders in other states and that may enhance their participation in the annual meeting process.
3. Corporations would save money. For example, in the 1998 proxy season, ADP charged its corporate clients $0.03 for an Internet vote, $0.18 for a telephone vote, and $0.36 for a proxy returned by mail.⁶
4. Companies that take pride in innovation and the paperless office should not be stymied in expanding such efforts to shareholder relations.
5. Wisconsin should continue to be an attractive corporate home by having a statute that clearly provides for the use of technology for proxy appointment.

For these reasons, among others, amendments are being proposed to Wisconsin's proxy appointment statute to allow shareholders to appoint a proxy by electronic transmission, including Internet transmission and touch-tone telephone transmission. Corporations incorporated in Wisconsin that wish to use electronic proxy voting are encouraged to lend their support to the proposed changes.

Assembly Speaker Scott Jensen (R-Waukesha) and Rep. Jeff Plale (D-South Milwaukee) are the lead authors of Assembly Bill 60, the Assembly version of the legislation. Companion legislation also will be introduced in the Senate; however, its authors are not confirmed at this writing.

If you have any questions about the proposed changes, please email or call Jennifer Boese at the State Bar at (608) 250-6045.

Endnotes

¹ Wis. Stat. § 180.0722, which is substantially the same as section 7.22 of the Revised Model Business Corporation Act (the RMBCA). As explained in Official Comment 1 to section 7.22 of the RMBCA, the word "proxy" often is used ambiguously, sometimes referring to the grant of authority to vote, sometimes to the document granting the authority, and sometimes to the person to whom the authority is granted. In the RMBCA the word "proxy" is used only in the last sense; the term "appointment form" is used to describe the document appointing the proxy; and the word "appointment" is used to describe the grant of authority to vote.

² Wis. Stat. § 180.0103(16).

³ See Friedman, Proxy Solicitations and the Cyberspace Revolution, Insights, Dec. 1997.

⁴ AB 811 Regulates the Use of Digital Signatures in Wisconsin, 71Wis. Law. 23-24 (April 1998).

⁵ Wis. Stat. §§ 137.05, 137.06.

⁶ Corp. Exec., Mar. - Apr. 1998, at 2.

Catherine S. Powell, William Mitchell 1990, practices general corporate and securities law with Quarles & Brady LLP, Milwaukee.

Wisconsin Lawyer